Dick Spotswood: Ross Valley Sanitary District may not get loan money back

ALMOST $350,000 million of taxpayer money is gone from the Ross Valley Sanitary District. By now the story of the agency's former general manager, Brett Richards, and the "housing" loan made to him has become a Marin legend.

In 2010, when hapless sewage district directors made Richards the loan, they didn't require him to provide security. The average banker, attorney or prudent creditor understands the basic rule that substantial loans need to be secured by an equally substantial asset, typically real estate, so that if a default occurs the lender can recover their funds.

Richards can't be blamed for this omission. He asked for something he shouldn't have been given, an unsecured loan. It was the elected board's duty to say "no security, no loan."

That mistake leads to the issue of how to recover the money. Ross Valley ratepayers can either eat the loss or think like a lawyer hired to recover the cash. While Richards paid $12,000 on his debt, he's paid nothing since last fall. His last known whereabouts are in Florida. It appears he owns no California real property.

The practical lawyer in me regards any sum owed by an out-of-state debtor with no known assets as uncollectable. Forget about Richards. Leave his fate to District Attorney Ed Berberian's thorough criminal investigation.

It's plausible that past RVSD board members, lacking rudimentary business sophistication, might have omitted this requirement out of ignorance. Directors at least had the prudence to hire an attorney to advise them.

There's no need to pay the RVSD's current attorneys high hourly fees to collect the debt. As anyone in collections understands, pay lawyers a fee contingent on recovery and they become bulldogs. Collect the money and the attorney gets one third. Collect nothing and the district incurs no fee.

Skaggs signed the loan documents as "approved as to form." That's legalese used by attorneys on contracts they draft. Clients want their attorney's signature guaranteeing the papers are in order. In this case, they weren't.

The terms of Richards' loan required him to either sign a promissory note and automatic wage deduction agreement or a deed of trust. The little word "or" was the key error. It should have been "and." Now that Richards is gone this distinction effectively makes the loan uncollectable.

That's something that attorneys are paid to know. Either Skaggs missed the point or instructed the board in closed session of its importance and the board told him not to require security. If he missed the word's importance, Skaggs' malpractice carrier may be on the hook. If he did advise the board of the distinction and they rejected his council, then Skaggs did all he could.

In that event, an aggressive collection lawyer looks at past district directors' potential liability. If they failed to follows their lawyer's advice, they may have made Richards a gift of public funds. That could lead to their civil liability. Then the question is whether they have any applicable insurance to cover their misdeed.

This collection effort could end up in a dry well, but it's a route that should be pursued if district ratepayers are ever to be made whole.

Columnist Dick Spotswood of Mill Valley now shares his views on local politics twice weekly in the IJ. His email address is spotswood@comcast.net.